Our Board of Directors concluded that Mr. Mumma should serve as a director of the Company because of his significant operational, financial and accounting experience in, and knowledge of, the Company, which he has served since shortly after our inception in 2003, and the broader mortgage-backed securities industry, where he has worked for more than 20 years. As Chairman and Chief Executive Officer of the Company, Mr. Mumma also serves as a critical link between management and our Board of Directors.

 

 

Our Board of Directors concluded that Mr. Bock should serve as a director of the Company because of his extensive expertise in economics, finance and accounting and his prior experiences in our industry, as well as his prior experiences as a Chief Financial Officer, Chief Executive Officer and director of other companies.

 

Our Board of Directors concluded that Mr. Clement should serve as a director of the Company because of his significant expertise in accounting and his prior experience working in the finance industry.

 

Our Board of Directors concluded that Mr. Hainey should serve as a director of the Company because of his valuable business, leadership and management skills obtained during his 30-plus years in the mortgage banking business, including as President of GE Capital’s mortgage banking business and as a member of its executive council.

 

Our Board of Directors concluded that Mr. Norcutt should serve as a director of the Company because of his extensive operating, business and financial experience from significant tenures in both the mortgage lending and mortgage portfolio management businesses, as well as his current role as President of a commercial real estate company.

 Our Board of Directors recommends that stockholders vote “FOR” the election of each of the nominees.

 

Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides our stockholders with an advisory vote to approve our named executive officer compensation. This advisory vote gives our stockholders the opportunity to express their views on the compensation of our named executive officers. Although this vote is advisory and is not binding, the Board of Directors and the Compensation Committee plan to take into consideration the outcome of the vote when making future executive compensation decisions.

 

At our 20132019 Annual Meeting of Stockholders, a majority of stockholders voted in favor of having an advisory vote to approve our named executive officer compensation each year, consistent with the recommendation of our Board of Directors. After consideration of these results and our Board of Director’s recommendation, we elected to hold future advisory votes on named executive officer compensation each year until the next advisory vote on frequency occurs. We are required under the Dodd-Frank Act to hold an advisory vote on the frequency of the advisory votes to approve named executive officer compensation at least every six years.

 

As described in detail under “Executive Compensation—Compensation Discussion and Analysis,” our compensation program for 20172019 was designed to compensate our named executive officers in a manner that attracts and retains top performing employees, motivates our management team by tying compensation to our financial performance, and rewards exceptional individual performance that supports our overall objectives, while also consistent with our needs as a company to maintain an appropriate expense structure. Our Board of Directors believes that our current executive compensation program compensates our named executive officers in an appropriate manner in relation to the size and performance of the Company and properly aligns the interests of our named executive officers with those of our stockholders. We utilized the 2013 Incentive Compensation Plan as effective for fiscal year 2017 (the “20172019 Annual Incentive Plan”),Plan, a performance-based incentive compensation plan that serves as a means of linking compensation both to our overall performance and to objective and subjective performance criteria that are within the control of our named executive officers (the “2019 Annual Incentive Plan”), for determining incentive compensation payable to our named executive officers for performance in 2017.2019. 

See the information set forth under “Executive Compensation—Compensation Discussion and Analysis” and “Executive Compensation—Executive Compensation Information” for more information on these elements of our named executive officer compensation program.

 

For these reasons, the Board of Directors strongly endorses our named executive officers compensation program and recommends that stockholders vote in favor of the following resolution:

 

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed under the compensation disclosure rules of the SEC, including the “Executive Compensation—Compensation Discussion and Analysis,” compensation tables and narrative discussion contained in the proxy statement for the 20182020 Annual Meeting of Stockholders.”

 

Our Board of Directors recommends that stockholders vote “FOR” the approval, on an advisory basis, of our named executive officer compensation.

 

The Audit Committee of our Board of Directors is directly responsible for the appointment, evaluation, compensation, retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. The Audit Committee has appointed Grant Thornton LLP, or Grant Thornton, as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2020. Grant Thornton has served as our independent registered public accounting firm since December 2009.

Although stockholder approval is not required, we desire to obtain from our stockholders an indication of their approval or disapproval of the Audit Committee’s action in appointing Grant Thornton as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2018.2020. Although we seek ratification of the appointment of Grant Thornton as our independent registered public accounting firm, the ratification of the appointment of Grant Thornton does not preclude the Audit Committee from subsequently determining to change independent registered public accounting firms if it determines such action to be in the best interests of the Company and its stockholders. If our stockholders do not ratify, confirm and approve this appointment, the appointment will be reconsidered by the Audit Committee and our Board of Directors.

 

We expect that a representative of Grant Thornton will be present atattend the virtual Annual Meeting where the representative will be afforded an opportunity to make a statement and to respond to appropriate questions.

 

Our Board of Directors recommends that you vote “FOR” the ratification, confirmation and approval of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2020.

 

Corporate Governance Highlights

 

Independence of Our Board of Directors

 

Our Corporate Governance Guidelines and the listing standards of the Nasdaq require that a majority of our directors be independent. Our Board of Directors has adopted the categorical standards prescribed by the Nasdaq to assist our Board of Directors in evaluating the independence of each of our directors. The categorical standards describe various types of relationships that could potentially exist between a board member and the Company and sets thresholds at which such relationships would be deemed to be material. Provided that no relationship or transaction exists that would disqualify a director under the categorical standards and our Board of Directors affirmatively determines that the director has no material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, including certain business relationships for which disclosure may be required in this proxy statement, our Board of Directors will deem such person to be independent. A director shall not be independent if he or she satisfies any one or more of the following criteria:

Under these criteria, our Board of Directors has determined that the following members of our Board of Directors are independent: David R. Bock, Michael B. Clement, Alan L. Hainey, Steven G. Norcutt, and Lisa A. Pendergast. We presently have sixseven directors, including these five independent directors.

 

Audit Committee

 

The Audit Committee of our Board of Directors is comprised of Messrs. Clement (Chairman)(Chair), Bock Hainey and Norcutt.Norcutt . Our Board of Directors has determined that each of the Audit Committee members is independent, as that term is defined under the enhanced independence requirements for audit committee members set forth in the rules of the SEC and in accordance with the Company’s independence criteria discussed under “—Independence of Our Board of Directors,” and that each of the members of the Audit Committee can read and understand fundamental financial statements and as such, is financially literate, as that term is interpreted by our Board of Directors. In addition, our Board of Directors has determined that each of Messrs. Bock, Clement and Norcutt is an “audit committee financial expert” as that term is defined in the SEC rules. For more information regarding the relevant experience of our audit committee financial experts, see each such individual's biography set forth under “Proposal No. 1: Election of Directors—Nominees for Election as Directors.” Mr. BockClement also serves on the board and audit committee of the more than 40multiple funds that comprise the AXA Equitable Holdings, Inc. complex. Our Board of Directors considers the AXA Equitable Holdings, Inc. complex to be one fund for purposes of the Audit Committee's charter. Until his retirement on December 31, 2019, Mr. Bock also served on the board and audit committee of the multiple funds that comprise the Amundi Pioneer Funds complex. Our Board of Directors considersconsidered the Amundi Pioneer Funds complex to be one fund for purposes of the Audit Committee’s charter.

 

The Audit Committee operates under a written charter adopted by our Board of Directors. The primary purpose and responsibilities of the Audit Committee include, among other things:

 

 The Audit Committee met 1511 times during the year ended December 31, 20172019 and met four times in executive session with our independent registered public accounting firm. For more information, please see “Audit Committee Report” herein.

Compensation Committee

 

The Compensation Committee of our Board of Directors is comprised of Ms. Pendergast (Chair) and Messrs. Norcutt (Chairman), Bock Clement and Hainey.Clement. Our Board of Directors has determined that each of the Compensation Committee members is independent in accordance with the Company’s independence criteria discussed under “—Independence of Our Board of Directors” and the independence standards of the Nasdaq that apply to Compensation Committee members. The Compensation Committee operates under a written charter adopted by our Board of Directors. In addition, the Compensation Committee administers our incentive compensation plans and equity-based compensation plans and programs. The Compensation Committee’s basic responsibility is to ensure that our Chief Executive Officer and other key members of management are compensated fairly and effectively in a manner consistent with the Company’s stated compensation strategy, competitive practice, applicable regulatory requirements and performance results.

 

The Compensation Committee met nineten times during the year ended December 31, 2017.2019.

Nominating & Corporate Governance Committee

 

The Nominating & Corporate Governance Committee of our Board of Directors is comprised of Messrs. Bock (Chair) and Hainey (Chairman), Bock, Clement and Norcutt.Ms. Pendergast. Our Board of Directors has determined that each of the Nominating & Corporate Governance Committee members is independent in accordance with the independence criteria discussed under “—Independence of Our Board of Directors.” The Nominating & Corporate Governance Committee operates under a written charter adopted by our Board of Directors. Among other duties, this committee:

 The Nominating & Corporate Governance Committee met foursix times during the year ended December 31, 2017.2019.

 

Other Committees

 

From time to time, our Board of Directors may establish other committees as circumstances warrant. Those committees will have the authority and responsibility as delegated to them by our Board of Directors.

 

 

The independent directors of our Board of Directors will occasionally meet in executive session that excludes members of the management team. During 2017,2019, the independent directors of our Board of Directors met in executive session fivefour times. Our Board of Directors has established a process by which the Lead Director will preside over meetings of our independent directors. Pursuant to this process, the Lead Director has the power to lead the meetings of our independent directors, set the agenda and determine the information to be provided. However, in practice, these meetings tend to be less formal procedurally and, generally allow for each participant to raise such matters and discuss such business as that independent director deems necessary or desires. Stockholders and other interested persons may contact the Lead Director, who is independent, in writing by mail c/o New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016, Attention: Secretary. All such letters will be forwarded to the Lead Director. For more information on how to communicate with our other directors, see “—Communications with Our Board of Directors.”

 

Board of Directors Leadership Structure

 

Pursuant to our Corporate Governance Guidelines, our Board of Directors has not established a fixed policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board of Directors. Instead, the Board of Directors believes this determination is part of the succession planning process and should be considered upon the appointment or re-appointment of a chief executive officer.

Our Board of Directors is currently led by its Chairman, Steven R. Mumma, who also serves as our Chief Executive Officer. Mr. Mumma was appointed as the Chairman of our Board of Directors, effective March 30, 2015. In connection with Mr. Mumma’s appointment as Chairman, our Board of Directors has adopted a policy that provides that in the event our Chairman is also an executive officer of the Company, our independent directors will select a Lead Director from among themselves. Mr. Alan Hainey, an independent director of the Company since 2004, serves as our Lead Director, a role he was initially appointed to on March 30, 2015. Our Lead Director's role exists, according to our Board of Director’s policy, (i) to provide leadership to our Board of Directors when the joint roles of Chairman and Chief Executive Officer could potentially be in conflict; (ii) to ensure that our Board of Directors operates independently of management; and (iii) to provide our directors with an independent leadership contact.

 

Our Lead Director's responsibilities, as set forth in our Board of Directors’ policy, include:

 

Our Board of Directors has vested the offices of Chairman and Chief Executive Officer in Mr. Mumma because it believes that combining the roles of Chairman and Chief Executive Officer facilitates the flow of information between management and our Board of Directors, while providing the appropriate balance between independent oversight of management and efficiency of the operation of our Board of Directors. Furthermore, our Board of Directors believes that having our Board of Directors’ deliberation of strategic alternatives framed by the person who (i) is the most knowledgeable about the Company and its industry, (ii) has been most instrumental in transforming the Company from a vertically integrated residential mortgage origination and portfolio investment manager into a diversified investment portfolio manager, and (iii) is responsible for executing our strategy is the optimal means for our Board of Directors to discharge its responsibility of establishing strategy. For these reasons, we believe our Board of Directors leadership structure is appropriate for the Company and does not affect our Board of Directors’ approach to risk oversight.

Our Board’sBoard of Directors’ Role in Risk Oversight

 

Code of Business Conduct and Ethics

 

 

Availability of Corporate Governance Materials

 

 

Director Nominations

 

The Nominating & Corporate Governance Committee of our Board of Directors performs the functions of a nominating committee, including identifying, evaluating and recommending to our Board of Directors candidates for service on our Board of Directors who satisfy the qualification requirements described in our Corporate Governance Guidelines.

 

The Nominating & Corporate Governance Committee’s charter provides that the committee will consider candidates recommended by stockholders for service on our Board of Directors. Stockholders should submit any such recommendations for the consideration of the Nominating & Corporate Governance Committee through the method described under “—Communications with Our Board of Directors” below. In addition, any stockholder of record entitled to vote for the election of directors at the 20192021 Annual Meeting of Stockholders may nominate persons for election to our Board of Directors if that stockholder complies with the notice procedures summarized in “—Stockholder Proposals for Our 20192021 Annual Meeting” below.

 

The Nominating & Corporate Governance Committee evaluates all director candidates in accordance with the director qualification standards described in our Corporate Governance Guidelines. The committee evaluates any candidate’s qualifications to serve as a member of our Board of Directors based on various criteria, including a nominee's experience, skills, accomplishments, background, age and diversity, and then reviews those qualifications in the context of the current composition of our Board of Directors and the evolving needs of our business. In addition, the Nominating & Corporate Governance Committee will evaluate a candidate’s independence, diversity, skills and experience in the context of our Board of Directors’ needs.

 

We do not have a formal policy with regard to the consideration of diversity in identifying director nominees, but our Board of Directors and the Nominating & Corporate Governance Committee strive to nominate directors with a variety of complementary skills so that, as a group, our Board of Directors will possess the appropriate talent, skills and expertise to oversee our business. Although we have no policy regarding diversity, both our Board of Directors and the Nominating & Corporate Governance Committee seek a broad range of perspectives and consider many factors, including the personal characteristics (gender, ethnicity, age and background) and experience (industry, professional and public service) of directors and prospective nominees to our Board of Directors.

Communications with Our Board of Directors

 

We provide a process for stockholders to send communications to our Board of Directors. Stockholders can send communications to our Board of Directors and, if applicable, to any committee or to specified individual directors in writing to such committee or individual director, c/o New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016, Attention: Secretary. We do not screen mail, except when warranted for security purposes, and all such letters will be forwarded to our Board of Directors and any such specified committee or individual directors.

 

Stockholder Proposals for Our 20192021 Annual Meeting

 

Our Board of Directors will provide for presentation of proposals by our stockholders at the 20192021 Annual Meeting of Stockholders, provided that these proposals are submitted by eligible stockholders who have complied with the relevant regulations of the SEC regarding stockholder proposals.

 

Stockholders intending to submit proposals for presentation at our 20192021 Annual Meeting of Stockholders tentatively scheduled to be held in June 2019, must submit their proposals in writing, and we must receive these proposals at our executive offices on or before December 21, 201830, 2020 for inclusion in our proxy statement and the form of proxy relating to our 20192021 Annual Meeting of Stockholders. We will determine whether or not to include any proposal in our proxy statement and form of proxy on a case-by-case basis in accordance with our judgment and the regulations governing the solicitations of proxies and other relevant regulations of the SEC. We will not consider proposals received after December 21, 201830, 2020 for inclusion in our proxy materials for our 20192021 Annual Meeting of Stockholders.

Directors Attendance at Meetings of our Board of Directors and Annual Meeting

 

Our Board of Directors held 1615 meetings, including four regularly scheduled quarterly meetings, during 2017.2019. All directors who were members of our Board of Directors for the year ended December 31, 20172019 attended 75% or more of the aggregate number of meetings of the Board of Directors and its committees on which they served during 2017, with the exception of Mr. Bock, who was only able to attend 73% of such meetings due to an unexpected medical issue during the first quarter of 2017. Mr. Bock attended 32 of the 44 meetings during 2017 and 25 of the 27 meetings of our Board of Directors and of the committees on which he served following the first quarter of 2017. In addition, Mr. Bock attended 100% of the meetings of our Board of Directors and of the committees on which he served during 2016 and 2015.2019.

 

We have a policy that directors attend the Annual Meeting of Stockholders. Each member of our Board of Directors who was a director of the Company at the time of our 20172019 Annual Meeting of Stockholders attended the 20172019 Annual Meeting of Stockholders.

 

There were no material related party transactions during 2017.2019.

Related Person Transaction Policy

 

Our Board of Directors has adopted a written policy regarding the approval of any “related person transaction,” which is any transaction or series of transactions in which we or any of our subsidiaries is or are to be a participant, the amount involved exceeds $120,000 and a “related person” (as defined under SEC rules) has a direct or indirect material interest. Under the policy, a related person would need to promptly disclose to our Secretary any related person transaction and (i) all material facts about the transaction, (ii) the benefits to us of the related party transaction, (iii) if applicable, the availability of other sources of comparable products and services and (iv) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. Our Secretary, together with outside legal counsel, would then assess whether the proposed transaction is a “related person transaction” and, if so, communicate that information to the Audit Committee. Based on its consideration of all of the relevant facts and circumstances, the Audit Committee will decide whether or not to approve such transaction. If we become aware of an existing related person transaction that has not been pre-approved under this policy, the transaction will be referred to the Audit Committee, which will evaluate all options available, including ratification, amendment or termination of such transaction. Our policy requires any member of the Audit Committee who may be interested in a related person transaction to recuse himself or herself from any consideration of such related person transaction.

 

As compensation for serving on our Board of Directors in 2017,2019, our non-employee directors received a combination of cash retainer of $120,000 and stock having a value of approximately $90,000.$120,000. Our Board of Directors elected to increase director compensation in 2019 after holding it flat the past two years, with all of the increase paid in the form of common stock. Our Chairman and Chief Executive Officer and our President only receivesreceive compensation for histheir services as our Chief Executive Officerofficers and receivesreceive no additional compensation for histheir service on our Board of Directors. Our directors have been, and will continue to be, reimbursed by us for reasonable out-of-pocket expenses incurred in connection with their service on our Board of Directors and any and all committees thereof.

 

The following table presents information relating to the total compensation of our directors for the fiscal year ended December 31, 2017.2019.

 

 

The following table and biographies contain information regarding our executive officers. These officers are appointed annually by our Board of Directors and serve at the Board’sBoard of Directors’ discretion.

 

 

For information on Mr.Messrs. Mumma and Serrano, please see histheir biographical descriptiondescriptions provided above under the caption “Proposal No. 1: Election of Directors—Nominees for Election as Directors.”

 

 

 

 

 

Compensation Discussion and Analysis

 

The information set forth under this Compensation Discussion and Analysis (“CD&A”) section describes the executive compensation program that was in place for 20172019 for our Chief Executive Officer (Steven R. Mumma), our former President (Kevin M. Donlon)(Jason T. Serrano), our Chief Operating Officer and Secretary (Nathan R. Reese) and our Chief Financial Officer (Kristine R. Nario) and our Managing Director and Secretary (Nathan R. Reese)Nario-Eng) (collectively, our “Named Executive Officers” or “NEOs”)NEOs). We had no other named executive officersNEOs in 2017.2019.

 

This CD&A explains the overall objectives, elements and policies underlying our named executive officer compensation program for 2017.2019. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Future compensation programs that we adopt may differ materially from current programs.

 

The following defines certain of the commonly used terms in this “Executive Compensation” section:

 

    

 

The Compensation Committee ofhas overall responsibility for approving, evaluating and, in some cases, recommending to our Board of Directors, is responsible for establishing and administering policy, on an annual basis, director and officer compensation plans, policies and programs, including determining salaries, annual cash incentive awards, long-term equity awards, restricted stock awards, employment, change in control and termination arrangements and director fees. Pursuant to its charter, the Compensation Committee has the sole authority to retain, terminate and pay any compensation consultant to be used to assist in the evaluation of director and senior executive compensation, as well as the authority to retain special legal, accounting or other consultants to advise the committee and may form subcommittees and delegate its authority to such subcommittees.

 

The Compensation Committee has primary responsibility for reviewing, setting and approving the compensation of our Chief Executive Officer and reviewing, approving and recommending to our Board of Directors, compensation for our other NEOs in a manner that is effective and consistent with our overall executive compensation strategy. As part of that responsibility, theThe Compensation Committee reviews on an individual basis the performance of our NEOs. As partNEOs and, with respect to the compensation of its process for reviewing the performance of our NEOs for 2017, the Compensation Committee consideredMessrs. Serrano and Reese and Ms. Nario-Eng, it also considers the recommendations of our Chairman and Chief Executive Officer with respect to the compensation of Mr. Reese and Ms. Nario. Moreover, at the 2017 Annual Meeting of Stockholders, the advisory vote on executive compensation was approved by approximately 90% of shares voted. Officer.

The level of support on the advisory vote was considered by the Compensation Committee and supported its decision to not make any changes to the structure of our compensation program during 2017.

The Compensation Committee reviews all elements of compensation and total compensation payable to each of our NEOs. As part of its annual review of the compensation paid toof our NEOs, the Compensation Committee typically considers a number of factors in determining or structuring compensation, including the nature of the executive’s job and the responsibilities related thereto, the executive’s job performance compared to goals and objectives established for the Company and the executive at the beginning of the year, the experience level of the executive in his or her current position, the compensation levels of competitive jobs within oura peer group (defined below),of companies selected by the Compensation Committee with the assistance of our independent compensation consultant, our financial performance and financial condition, the execution of our investment and financing strategy, the impact of compensation determinations on our budgeted operating expense ratios and certain other factors. These factors described above may vary from year to year in importance to, and usage by, the Compensation Committee, depending upon market conditions, corporate priorities and individual circumstances.

  

The Compensation Committee also reviews and makes recommendations to our Board of Directors annually with respect to the compensation of our non-management directors. In setting director compensation, our Board of Directors generally considers the compensation practices and levels for directors paid by oura peer group selected by the Compensation Committee and by other mortgage REITs, as well as the expected time commitment from the non-management directors in such year.

  

 

 

 

Base salary, which represents the fixed element of our executive compensation program, provides for basic economic security at a level that allows us to retain the executive’s services. The Compensation Committee generally establishes annual base salaries for our NEOs commensurate with the level of experience that the executive brings to the position, the nature of the responsibilities required of the executive, such as whether the executive is performing in multiple roles, how successful the executive is in achieving goals established by the Compensation Committee and the executive’s contributions to the Company and internal pay equity considerations, but does not assign any specific weights to these factors. As discussed in other parts of this CD&A, the Compensation Committee also gives significant consideration to the size of the Company and our budgeted operating expenses in setting annual base salaries and has not historically targeted base salaries for our NEOs to any specific level within the range of base salaries paid by our peer group. Base salaries are reviewed annually and may be adjusted to better match competitive market levels or to recognize an executive’s professional growth and development, increased responsibility or other discretionary factors.

 

In February 2017,2019, the Compensation Committee elected to increase base salaries from 2016 levelssalary for each of Messrs.Mr. Mumma and Donlon and Ms. Nario for fiscal year 2017, with Mr. Mumma’s set at $800,000, Mr. Donlon's at $650,000, and Ms. Nario’s at $325,000.2019, while holding other NEOs flat against 2018 levels. The determination to increase base salariessalary in 20172019 for these NEOsMr. Mumma was driven primarily by internal pay equity considerations and by our desire to establish a base salary and drivethat drives total compensation towards levels that are more competitive with the base salaries and total compensation paid by our peer group for these roles.this role. Mr. Reese's annualSerrano’s base salary for 2019 was unchanged at $350,000.based, in part, on internal pay equity, a benchmarking analysis that placed Mr. Serrano’s base salary in close proximity to the median for similarly situated executives in the peer group, and the amount the Compensation Committee deemed appropriate to attract Mr. Serrano to the Company. In addition, in connection with Mr. Serrano's recruitment to become our new President, the Compensation Committee also granted Mr. Serrano 161,812 shares of restricted stock on January 7, 2019 that will vest in full on the third anniversary of the date of grant.

 

IncentiveAnnual incentive compensation, in the form of annual cash incentive compensation and equity incentiverestricted stock awards, subject to time-based vesting conditions (payable in the form of restricted stock), is available to each of the NEOs under the ICP.2019 Annual Incentive Plan. Annual incentive compensation serves as a means of linking annual compensation both to our overall performance and to objective and subjective performance criteria that are within the control of the NEOs. 

Pursuant to the 20172019 Annual Incentive Plan, we provided our NEOs withhad the opportunity to earn annual incentive compensation forupon achieving certain corporate financial and non-financial goals. The 20172019 Annual Incentive Plan, which provided for no minimum award or guaranteed payment, was comprised of two parts: a quantitative component and a qualitative component. Pursuant to the 20172019 Annual Incentive Plan, Mr.Messrs. Mumma’s and Serrano's incentive compensation was weighted such that 80%75% was based on performance under the quantitative component and 20%25% under the qualitative component, while Mr. Reese’s incentive compensation was weighted such that 65%60% was based on performance under the quantitative component and 35%40% under the qualitative component. The Compensation Committee set Ms. Nario’sNario-Eng’s incentive compensation under the 20172019 Annual Incentive Plan to be weighted such that 25%50% was based on performance under the quantitative component and 75%50% was based on performance under the qualitative component. Because Mr.Messrs. Mumma isand Serrano are our most senior executiveexecutives and hashave ultimate responsibility over our investment portfolio and other business decisions, our success or failure is highly dependent on him.them. As a result, the Compensation Committee concluded that Mr.Messrs. Mumma’s and Serrano's incentive compensation should be weighted more heavily on our achievement of the performance criteria under the quantitative component as compared to the weighting of components for Mr. Reese and Ms. Nario.Nario-Eng. In addition, because Ms. NarioNario-Eng does not have management responsibility for investment strategy, asset selection or portfolio management, unlike Mr. Reese, the Compensation Committee concluded that Ms. Nario’sNario-Eng’s performance under the quantitative component should be weighted at 25%50%.

 

  

 

Notwithstanding the tables above, the Compensation Committee was authorized under the 20172019 Annual Incentive Plan to increase or decrease the percentage payout under the quantitative component based on our performance relative to our peer group. The Compensation Committee did not make any adjustments to the percentage payout under the quantitative component for any of our NEOs for fiscal year 2017.2019.

 

The following table sets forth the hurdles and corresponding annual incentive compensation payouts for each of the NEOs under the qualitative component of the 20172019 Annual Incentive Plan:

  

The Compensation Committee had the discretion to determine the qualitative component at levels between the performance levels identified in the table above. Set forth in the table below is the payout calculation for each of our NEOs based on the Compensation Committee's determination of the qualitative component of the 20172019 annual incentive compensation.

 

 

 

 

For 2017,2019, the Compensation Committee awarded, in accordance with the terms of the 20172019 Annual Incentive Plan, a total of 75,042248,815 shares of restricted stock to Mr. Mumma (having a grant date fair value of approximately $417,984,$1,575,000, which is based on the closing sale price of our common stock on February 13, 2018,4, 2020, the date the stock award was approved by our Compensation Committee), 15,246207,346 shares of restricted stock to Mr. Serrano (having a grant date fair value of approximately 1,312,500), 39,494 shares of restricted stock to Mr. Reese (having a grant date fair value of approximately $84,920)$250,000) and 13,10239,494 shares of restricted stock to Ms. NarioNario-Eng (having a grant date fair value of approximately $72,977)$250,000). The formulaic approach of having equity incentive awards subject to time-based vesting conditions tied directly to incentive compensation earned under the 20172019 Annual Incentive Plan was influenced by (i) our desire to increase the executive’s ownership stake in the Company and better align the executive’s interests with those of our stockholders, (ii) our desire to tie total incentive compensation (including equity incentive awards) to a single incentive performance plan weighted, in the case of two of our NEOs, more heavily upon quantitative performance measures, (iii) our desire to increase the amount of non-cash, equity incentive compensation earned by our Chief Executive Officer and President as a percentage of histheir total compensation, (iv)(iii) our desire to provide our NEOs with a competitive balance of current cash compensation and equity compensation subject to time-based vesting conditions that rewards performance and increases the executive’s incentive to remain with the Company over the longer-term and (v)(iv) our desire to create an incentive compensation plan that spreads the expense of a portion of the incentive compensation program over a three-year period.

 

Restricted stock awards are most frequently utilized by the Compensation Committee as a form of equity incentive award due, in part, to the distribution policies and requirements of REITs and the effect that those distribution requirements tend to have on our common stock price, which tends to make stock options a less desirable form of equity incentive award.

Benefits are also established based upon a determination of what is needed to aid in attracting and retaining executive talent, as well as providing long-term financial security to our employees and their families. The NEOs are eligible to participate in our health, dental and vision plans, and various insurance plans, including disability and life insurance, and in our 401(k) plan. The primary benefits for the NEOs are as follows:

 

In order to achieve our compensation objective of attracting, retaining and motivating qualified senior executives, we believe that we need to provide our Chief Executive Officer with severance protections that are consistent with the severance protections offered by companies similar to us. Consistent with this philosophy, we believe that severance should be payable to Mr. Mumma in the event his employment is terminated under certain circumstances. As such,we are a party to an employment agreement with Mr. Mumma. For more information regarding the terms of Mr. Mumma’s employment agreement, see “—Other Compensation Arrangements—Employment Agreement.” The terms of Mr. Mumma’s employment agreement is considered annually by the Compensation Committee. Prior to Mr. Donlon's resignation in September 2017, we were also party to an employment agreement with Mr. Donlon that provided severance protections similar to those provided to our Chief Executive Officer. See “—Compensation Developments During 2017.” We have not entered into employment agreements with our other NEOs.

 

Base Salary

The Compensation Committee and our Board of Directors have approved the following 20182020 base salaries for our NEOs:executive officers:

 

During 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended, disallowed public companiesgenerally disallows a tax deduction for federal income tax purposes of remunerationdeduction to public companies for compensation in excess of $1 million paid in any fiscal year to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief financial officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act in any taxable year. Remuneration in excess of $1 million was deductible if it was "performance-based compensation" within“covered employees” (within the meaning of Section 162(m) or qualified for one of the other exemptions from the deduction limit. In making compensation recommendations, the Compensation Committee considers the potential effects of Section 162(m) on the compensation of our NEOs.

 

 

Under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financial results due to material noncompliance with any financial reporting requirement as a result of misconduct, our Chief Executive Officer and Chief Financial Officer must reimburse us for (i) any bonus or other incentive-based or equity-based compensation received during the twelve months following the public issuance of the non-compliant document and (ii) any profits realized from the sale of our securities during those twelve months. Following the SEC’s adoption of final rules regarding executive compensation recoupment policies pursuant to the Dodd-Frank Act, we will consider and adopt a separate executive compensation recoupment policy in accordance with the final rules.

 

 

When structuring our overall compensation practices for our employees generally, consideration is given as to whether the structure creates incentives for risk-taking behavior and therefore impacts our risk management practices. Attention is given to the elements, the performance conditions and the mix of pay as well as ensuring that employees’ awards align with stockholders’ value.

 

The Compensation Committee has assessed the compensation policies and practices for our employees, including our NEOs, and concluded that they do not create risks that are reasonably likely to have a material adverse effect on us. The Compensation Committee generally considers whether our compensation programs encourage excessive risk taking during its annual review of such programs, which typicallygenerally occurs during the first quarter of each year.around year end.

Executive Compensation Information

 

 

The following tables should be read in conjunction with the related footnotes set forth below, the information under the caption “Compensation Discussion and Analysis” beginning on page 2123 and the information under the caption “—Other Compensation Arrangements.” We summarize below the compensation information for the fiscal years ended December 31, 2017, 20162019, 2018 and 20152017 for each of Messrs. Mumma and Reese and Ms. NarioNario-Eng and for the fiscal years ended December 31, 2017 and 20162019 for Mr. Donlon. Mr. Donlon resigned from his position with us on September 18, 2017.Serrano.

 

 

 

 

The following table presents information regarding plan-based awards to the NEOs during the fiscal year ended December 31, 2017.2019. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these awards in certain circumstances.